It’s important to realize that by selling stock, the tax hit is about 30% of the gain ( federal and state)if notg higher. Thus, this means that sellers are happily taking a 30%+ haircut just in order to get out of stocks..or, to put it another way, they are anticipating a DECLINE of MORE than 30%
When you put it like that: Wow.
But you have to pay the 30% tax eventually anyway. And the more you make, the more tax you have to pay. So you either pay that 30% tax now or you pay it later.
So no, it does not mean you expect a 30% decline in the market. That is false.
OK, the idea is good, but the math is bad. If you bought the stock for zero dollars (you got it for FREE) and sold it for market value, then your math works.
However, if you bought the stock and now it has gone up, as many have, 10%, and you sell it, then you are taxed on 30% of the 10% gain. So they are anticipating a DECLINE of 3% or more on that example stock.
Put in more succinct form, they expect the decline (D) to be more that 30% of the GAINS (G) that they have realized over the term of their holdings.
D = 0.30 G
NOT
D = 30% P (where P = PRICE of the stock)
Bear in mind (no pun intended) that if D > G then you are losing money, and not because of taxes, just because the stock is worth less than you paid for it. I believe that the recent gains WILL be wiped out, so I'm not criticizing the intent nor the sentiment, only the math.